Thriving on Less – Make Small Financial Changes First

By Leo Babauta in Management on January 1st, 2009 / No Comments

“Whoever wants to reach a distant goal must take small steps.” – Saul Bellow

While it’s important, when scaling back, to try to eliminate non-essential expenses as much as possible, you can’t change everything all at once. And even if you tried, you’d be less likely to be successful – drastic changes don’t stick as well as small ones do.

So start small when you start changing your financial habits. Want to save money? Cut back on eating out a bit – if you currently eat out 5 times a week, for example, try doing it only 2-3 times and save the difference. That’s a great way to start.

Look for the things that are easy to change first: eating out, entertainment, non-essential purchases (magazines, shoes you don’t really need, more clothes, gadgets, stuff like that), subscriptions you don’t really use much, things like that. Change one at a time, maybe two at the most. Slowly start to cut things out, and you’ll adjust to your new lifestyle each step of the way. In six months, you’ll have a lifestyle that’s scaled back greatly, but you won’t feel it as much because it was small steps, one or two at a time.

Some small changes you might consider:

Cable TV. This might be a drastic change for some. I cut it out and don’t miss it though. Online website subscriptions you pay for. Various services charge $5, $10, $20 per month – if you’re signed up to a few of them, they can add up.

Eating out. Reduce the number of times you eat out per week or month. Cook at home more. Convenience food. Microwave or pre-cooked dinners or lunches are more expensive than buying the ingredients and cooking them yourself.

Entertainment. Many people go to the movies a lot or other types of shows or entertainment. But you don’t have to spend a lot of money to have fun.

Drinking. Do you go out with friends and drink a lot? That can really add up. Find healthier ways to have fun.

Driving. Consider driving less in order to save gas (and maintenance) costs. Online shopping. It’s easy to order something out of impulse. Put yourself on a 30-day freeze and try to live without buying online.

Mall shopping. Going to the mall or similar places is a guaranteed way to spend money. Stay away from these places – have fun at home, at a park or beach or trail, at a free event, at a friend’s house, and so on.

Coffee. Do you buy a $4 cup of coffee every weekday? That’s $80 a month or $260 a year. And much more if you buy more than one cup, or buy a snack to go with it.

Magazines, newspapers or books. I’m a fan of reading, but you can read most magazines and newspapers online. And you can check out a book at a library or buy a used one for cheap.

There are, of course, many other types of smaller expenses you can change, but this list should give you some ideas. Again, don’t change them all at once – small changes every couple weeks should be enough. Over time, you’ll have save thousands of dollars.

Chapter 6 – Look at Large Expenses for the Long Term

“I buy my freedom with my frugality.” – Vicki Robins

Once you’ve made easier changes, you can start looking at the big expenses. These are usually the items that take up the bulk of your budget: housing, auto, utilities, food, education, depending on your circumstances … the bigger ticket items. A change in any one of these expenses makes a big difference.

You could save hundreds of dollars a year by cutting out coffee and magazines, but you could save thousands if you had a cheaper car or house. Now, big changes like this are not so easy to make, but if you

think about them for the long term, you can accomplish them. For example, if you decide you want to move to a less expensive house or apartment, you might not be able to do that this week … but in a few months, the opportunity to rent or buy a great place might come up and if you have your eye open for such an opportunity, you can make the move. And save thousands a year.

Some changes you might consider to lower large expenses:

Smaller house or apartment. This is probably the biggest expense for most people. For many years, a big house has been the American dream. But as we’ve seen recently, bigger houses aren’t necessarily better if you can’t afford them. They’re also harder and more expensive to maintain.

And the thing is, we usually don’t need a big house, especially if we get rid of a lot of the clutter that necessitates more space and more storage. (See The Power of Less book for more on reducing clutter, at Keep your eye out for smaller houses or apartments – just what you need and not more. If you can keep things simple and uncluttered, you can live happily in a smaller space and save a lot of money.

Rent rather than own
. This will probably spark a huge debate, as it always does. The thing is, just don’t assume that buying is the better investment. If you calculate the interest you pay on a mortgage, the cost of insurance and maintenance, buying is often much more costly than renting … and if you rent, save money, and then invest the difference, you can actually end up well ahead in the long run. Now, it’s not a given, so do a comparison, factoring in all expenses.

Smaller or less expensive car. Do you have a big SUV or expensive vehicle that costs a lot of money? They’re a status symbol, to be sure, but they also cost a lot – in car payments, in gas, in maintenance. Look to trade your bigger or more expensive vehicle in and you can save a lot.

Closer location. If you currently commute a long distance to and from work, or to other places you go often, you might spend a lot of time commuting and a lot of money on gas. Consider moving somewhere closer to work (or working somewhere closer to home) to save money and time. As a bonus, you can also commute to work by bike if you live closer, saving money and burning calories at the same time.

Reduced utilities. Utilties are always a big part of the budget, but you can reduce them: be more energy and water efficient, consider dropping your home phone and just using a cell phone, and possibly getting rid of cable TV.

Cheaper food. One of the biggest expenses for some people is eating out – the the average person spends well over $2,000 a year on eating out. Restaurants are expensive, including fast-food (not to mention the health hazards). It’s much cheaper to cook your own food. Our family creates a weekly menu, then we buy the groceries, and cook dinner (and lunch) each evening.

Lately I’ve even been prepping it in the morning, so it’s a snap when we get home. If you do eat out, look for inexpensive, healthy options, and of course go somewhere nice once in awhile. For lunch, if you normally eat out at work, consider brown bagging your lunch – you can save $1,000-2,000 a year.

Go with one car. Many families have two or more cars. Besides your house, your car is probably your most expensive item. If you can do with one, you should. My wife and I have six kids, and yet we have learned to manage with one car.

You might have other large-ticket expenses in your budget … take a look at them and do a little thinking and research to see if you can reduce the cost somehow. If you do this gradually, one thing at a time, it won’t be so difficult.

Stay tuned for chapter 7 – Changing Your Spending Habits or download the ebook for free here.

About the author:
Leo Babauta is the author of The Power of Less and the creator and blogger at Zen Habits, a Top 100 blog with 80,000 subscribers – one of the top productivity and simplicity blogs on the Internet.

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